This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its March 2018 decision in Arandis Power (Pty) Ltd v. President of the Republic of Namibia, the Supreme Court of Namibia struck down a contract awarded after the expiry of a bid validity period. The case dealt with the award of a multibillion-dollar power plant contract made by the Namibia Power Corporation (NamPower) pursuant to a public tendering process. After the process was challenged by a competing bidder, NamPower conceded that it awarded the contract to a non-compliant bidder after the expiry of the bid validity period. However, the winning bidder, Arandis Power (Pty) Ltd, continued to defend the contract award against the challenge.
As the Supreme Court noted, the challenged process was subject to rules contained in NamPower’s tendering and procurement policy, which set down protocols for dealing with the expiry of bid validity periods:
Clause 14.8 of the Policy deals with the tender validity and periods and extensions to it. It provides:
‘Tenders shall be valid for the period stipulated in the specific terms of reference of the Tender from the closing date of the Tender to allow NamPower adequate time to finalise the Tender award.’
The further sub-clauses of clause 14 permit an extension of the tender validity period on good cause shown to the satisfaction of the Tender Board. A further sub-clause expressly authorises the extension of time where the assessment of tenders is not completed within the tender validity period. The clause specifically provides that extensions would be for the minimum period needed.
The RFP in this matter provided that tender proposals are valid for a period of 6 months from the closing date or such further date as NamPower may agree with the shortlisted bidders. The tender closing date was set at 12 September 2014. This meant that tender proposals were only valid until 11 March 2015, unless the tender validity period were to have been extended. No extension occurred and the NamPower board made its decision to award the tender on 30 March 2015 – after the validity period had expired, as was conceded by NamPower.
Clause 33 deals with the awarding of tenders. It expressly provides:
‘The awarding of tenders and quotations to the successful tenderers shall always be made within the tenders’ validity period and in accordance with levels of authority.’
In this matter, there had been no tender award during the validity of the competing tenders. Clause 33 expressly requires that NamPower is to award tenders within their validity period. The elaborate provisions concerning securing an extension to a tender validity period had not been invoked by NamPower.
The Supreme Court then summarized the following legal authorities relied on by the complainant to support the argument that contract awards made after the bid validity period were invalid:
Mr Budlender relied upon a trilogy of cases in South Africa as to the consequence of a tender award after the expiry of the tender validity period. Those three decisions concerned the legal consequence of a failure by a public body, to accept, within the stipulated validity period for the (tender) proposals, any of the proposals received. The same issue arises in this review.
In each of those cases, the same conclusion was reached. In the first of the trilogy, Southwood J in Telkom SA Limited v Merid Training (Pty) Ltd and Others; Bihati Solutions (Pty) Ltd v Telkom SA Limited and Others concluded:
‘The question to be decided is whether the procedure followed by the applicant and the six respondents after 12 April 2008 (when the validity period of the proposals expired) was in compliance with section 217 of the Constitution. In my view it was not. As soon as the validity period of the proposals had expired without the applicant awarding a tender the tender process was complete – albeit unsuccessfully – and the applicant was no longer free to negotiate with the respondents as if they were simply attempting to enter into a contract. The process was no longer transparent, equitable or competitive. All the tenderers were entitled to expect the applicant to apply its own procedure and either award or not award a tender within the validity period of the proposals. If it failed to award a tender within the validity period of the proposals it received it had to offer all interested parties a further opportunity to tender. Negotiations with some tenderers to extend the period of validity lacked transparency and was not equitable or competitive. In my view the first and fifth respondent’s reliance only on rules of contract is misplaced.’
This well-reasoned approach was followed by Plasket J in Joubert Galpin Searle Inc and Others v Road Accident Fund and Others in reaching a similar conclusion:
‘By the time the tender validity period has expired, there is nothing to extend because, as Southwood J said in Telkom, the tender process has been concluded, albeit unsuccessfully. The result, in this case, is that the RAF had no power to award the tender once the bid validity period had expired and it had no power to extend the period as it purported to do. In the language of s 6(2)(a)(i) of the PAJA, the decision-maker – the board, in this instance – ‘was not authorised’ to take the decision. Put in slightly different terms, there were no valid bids to accept, so the RAF had no power to accept the expired bids.’
In relying on these decisions, the Supreme Court concluded that the contract was awarded in contravention of the agency’s policies and should therefore be struck down as invalid:
NamPower’s Procurement Policy determines the validity of the process. The Policy makes it clear that a tender must be awarded within the tender validity period. In the absence of an extension, it was no longer open to NamPower to accept a tender. The tender process had thus been completed upon the expiry of the validity period, albeit unsuccessfully. It follows that the award of the tender to Xaris outside the validity period, in the absence of any extension, rendered it invalid.
As this case illustrates, while public institutions may enjoy some latitude in developing their own local procurement policies and procedures, those local rules typically operate within the context of more broadly applicable statutory and common law standards. Such broader rules include the administrative law principles of natural justice and due process that require public institutions to follow locally created rules, since the failure to do so can be used as evidence of unfair, unreasonable, or arbitrary decision-making and result in the nullification of resulting contract award decisions.
